Philip Sakthivel, CHENNAI V. ITO, CHENNAI

ITA 71/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5088 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 14-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N DEVANATHAN
• Keywords: Reopening of assessment; Recovery proceedings; Depreciation; Opportunity of being heard; Wrong claim; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 143(1); 147; 246; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 71/MDS/2011 ASSESSMENT YEAR :2002-03 SHRI PHILIP SAKTHIVEL, 1229, 20 TH MAIN ROAD, ANNA NAGAR, CHENNAI-600 040 V. THE INCOME-TAX OFFICER, CIRCLE-XIV(3), CHENNAI. (PAN: AAIPS2091P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N. DEVANATHAN RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(A)-XII, CHENNAI. THERE ARE TWO GRIEVANCES RAIS ED BY IT. PRIMARILY, THE ASSESSEE ATTACKS ASSUMPTION OF JURISDICTION UNDER S ECTION 147 OF THE INCOME TAX ACT, 1961 . ON MERITS, ASSESSEE ASSAILS NON-GRANTI NG OF DEDUCTION U/S. 80HHC OF THE ACT. 2. SHORT FACTS APROPOS ARE THAT, ASSESSEE AN EXPORT ER OF AGRICULTURAL PRODUCE, HAD FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASS ESSMENT YEAR ON 31.3.2003 I.T.A. NO.71/MDS/2011 2 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 18.09.2003. THEREAFTER, NOTICE U/S. 148 WAS SERVED ON THE ASSES SEE ON 24-03-2006 WHEREUPON THE ASSESSEE FILED A LETTER STATING THAT THE RETURN FILED BY IT ON 31.03- 2003 COULD BE DEEMED TO BE THE RETURN FILED IN PURS UANCE TO NOTICE U/S. 148 OF THE ACT. REASON CITED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR INITIATION OF RE-ASSESSMENT PROCEEDINGS WAS THAT TH E ASSESSEE HAD WRONGLY CLAIMED DEDUCTION OF ` 1,33,67,899/-U/S. 80HHC AND THAT HE HAD RECEIVED INFORMATION FROM INVESTIGATION WING OF THE DEPARTME NT THAT SUCH CLAIM OF DEDUCTION WAS WRONG. IN THE RE-ASSESSMENT PROCEEDI NGS ASSESSEE WAS REQUIRED TO FILE DETAILS OF ITS CLAIM FOR DEDUCTION U/S. 80H HC OF THE ACT. AS PER THE ASSESSING OFFICER BOTH THE ASSESSEE AS WELL AS NATI ONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. (IN SHORT NAFED ) HAD CLAIMED SUCH DEDUCTION ON SAME EXPORTS MADE OUT OF INDIA TO SRI LANKA. AS SESSING OFFICER ADDRESSED LETTERS TO NAFED TO VERIFY THIS ASPECT AND REPLIES R ECEIVED FROM NAFED WERE COMMUNICATED TO THE ASSESSEE. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR THE ASSESSEE HAD EXPORTED 41,447 ME TRIC TONS OF RICE TO M/S. CO-OPERATIVE WHOLESALE ESTABLISHMENT OF SRI LANKA. A SSESSING OFFICER ON VERIFICATION OF EXPORT DOCUMENTS SUCH AS INVOICES, S HIPPING BILLS, G.R. 1 FORM ISSUED BY RESERVE BANK OF INDIA, CERTIFICATE ISSUED BY AGRICULTURAL PROCESSED FOOD PRODUCTS EXPORT DEVELOPMENT AUITHORITY (IN SHOR T APEDA), COPY OF LETTER OF CREDIT AND THE AGREEMENT FOR THE EXPORT OF RICE WIT H THE FOREIGN BUYER, I.E, THE I.T.A. NO.71/MDS/2011 3 CO-OPERATIVE WHOLESALE ESTABLISHMENT, COLOMBO, WAS O F THE OPINION THAT THE EXPORTER WAS NAFED AND NOT THE ASSESSEE. THE BUYER, M/S. CO-OPERATIVE WHOLESALE ESTABLISHMENT, COLOMBO HAD, AS PER THE ASS ESSING OFFICER, ENTERED INTO AN AGREEMENT WITH NAFED AND EVEN THE LETTER OF CREDIT OPENED BY THE SAID BUYER WAS IN THE NAME OF NAFED. AS PER THE ASSESSIN G OFFICER, WHEN THESE WERE BROUGHT TO THE ATTENTION OF THE ASSESSEE, IT H AD CONFIRMED THE SAME. ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE HAVING NOT ADMITTED EXPORT TURNOVER OF THE RICE AS EXPORTED TO SRI LANKA IN IT S TRADING ACCOUNT AND ALSO HAVING NOT OBTAINED A DISCLAIMER CERTIFICATE AS PER SECTION (4A) THEREOF WAS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80HHC FOR ITS E XPORTS TO SRI LANKA. ASSESSING OFFICER ALSO BROUGHT TO THE NOTICE OF THE ASSESSEE THAT ON THE CREDIT SIDE OF HIS P & L ACCOUNT IT HAD SHOWN THE PROFITS ON EXPORTS TO SRI LANKA BUT THE TURNOVER OF ` 31,87,47,324/- ON THE BASIS OF WHICH HE HAD CLAIME D DEDUCTION U/S. 80HHC WAS NOT REFLECTED THEREIN. ASSESSEE WAS ALSO PUT T O NOTICE THAT IN THE ABSENCE OF A DISCLAIMER CERTIFICATE FROM M/S. NAFED, NO DEDUCTI ON COULD BE ALLOWED. FOR THIS THE ASSESSEES REPLY WAS THAT THOUGH HE HAD DO NE EXPORTS IN THE NAME OF NAFED, THE FOREIGN EXCHANGE RECEIVED WERE CREDITED I N HIS ACCOUNT AND SINCE THE EXPORT TURNOVER WAS NOT REFLECTED IN HIS PROFIT & L OSS ACCOUNT, THE QUESTION OF ANY DISCLAIMER CERTIFICATE BEING OBTAINED FROM NAFED DID NOT ARISE. FURTHER AS PER THE ASSESSEE VIDE EXPLANATION (BAA) TO SECTION 8 0HHC OF THE ACT, THE EXPORT INCOME EARNED BY IT FROM ITS EXPORTS TO SRI LANKA F ELL UNDER ANY RECEIPTS BY WAY I.T.A. NO.71/MDS/2011 4 OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES O R ANY OTHER RECEIPT OF A SIMILAR NATURE AND THEREFORE IT WAS ELIGIBLE FOR DEDUCTION ON THE AMOUNT OF PROFITS DERIVED ON ACCOUNT OF SUCH EXPORTS. HOWEVER, AS PE R THE ASSESSING OFFICER, ASSESSEE WAS A SUPPORTING MANUFACTURER AND AS PER EX PLANATION (D) TO SECTION 80HHC OF THE ACT READ ALONG WITH SUB-SECTION (4A) T HEREOF, HE WAS OBLIGED TO FILE A REPORT OF THE CHARTERED ACCOUNTANT CERTIFYING THE CORRECTNESS OF THE CLAIM OF DEDUCTION AND ALSO A CERTIFICATE FROM EXPORT HOUSE OR A TRADING HOUSE CERTIFYING THAT IT HAD NOT CLAIMED ANY DEDUCTION OF THE EXPORT S. FURTHER AS PER THE ASSESSING OFFICER, THE EXPORTER ITSELF HAD CLAIMED DEDUCTION U/S. 80HHC AND HAD ALSO CONFIRMED THAT IT HAD NOT ISSUED ANY DISCLAIME R TO THE ASSESSEE. RELYING ON THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE C ASE OF SEA PEARL INDUSTRIES AND OTHER V. CIT (247 ITR 578) AND MINERAL & METAL TRADITION CORPORATION V. R.C. MISHRA AND OTHERS (201 ITR 851) THE ASSESSING OFFICER CAME TO A CONCLUSION THAT ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF DEDUCTI ON UNDER SECTION 80HHC OF THE ACT, IN RESPECT OF HIS EXPORTS TO SRI LANKA. 3. IN ITS APPEAL BEFORE THE CIT(A) SUBMISSION OF TH E ASSESSEE WAS THAT THE RE-OPENING OF ASSESSMENT WAS NOT IN ORDER SINCE THE RE WAS NO ESCAPEMENT OF INCOME. ACCORDING TO THE ASSESSEE THE RE-OPENING W AS RESORTED TO BY A CHANGE OF OPINION WHICH WAS NOT PERMISSIBLE IN LAW. ON ME RITS, ARGUMENT OF THE ASSESSEE WAS THAT THE EXPORTS WERE DONE BY THE ASSE SSEE AND NAFED HAD NO ROLE TO PLAY SINCE THE ASSESSEE HAD GOT THE ORDER T HROUGH ITS AGENT IN SRI LANKA I.T.A. NO.71/MDS/2011 5 AND EXECUTED THE ORDER ITSELF. HOWEVER CIT(A) WAS NOT IMPRESSED ON BOTH THESE COUNTS. ACCORDING TO HIM, THE RE-OPENING WAS NOT B ASED ON ANY CHANGE OF OPINION AND THE INFORMATION RECEIVED FROM THE INVES TIGATION WING BY THE ASSESSING OFFICER CLEARLY BROUGHT OUT THE NEED FOR RE-ASSESSMENT PROCEEDINGS TO BE SET IN MOTION. 4. INSOFAR AS THE MERITS WAS CONCERNED, AS PER THE LEARNED CIT(A) ASSESSEE WAS ACTING MERELY AS AN AGENT OF NAFED PROCURING RIC E AND EXPORTING IT TO THE COUNTRY AS DIRECTED BY NAFED AND ALL THE PAYMENTS IN CONVERTIBLE FOREIGN EXCHANGE WERE RECEIVED BY NAFED. FURTHER, THE CERTI FICATE REQUIRED FOR MAKING A CLAIM U/S. 80HHC AS A SUPPORTING MANUFACTURER WAS NEVER AVAILABLE WITH THE ASSESSEE NOR PRODUCED BY IT. LEARNED CIT(A) MADE A SPECIFIC NOTE OF A LETTER DATED 22.11.2006 OF NAFED WHICH WAS IN REPLY TO A QU ERY OF THE ASSESSING OFFICER IN WHICH M/S. NAFED CONFIRMED THAT IT HAD CL AIMED DEDUCTION U/S. 80HHC OF THE ACT ON THE EXPORTS DONE IN THEIR NAME THROUG H THE ASSESSEE AND THAT THEY HAD NOT ISSUED ANY DISCLAIMER CERTIFICATE TO THE AS SESSEE FOR CLAIMING DEDUCTION UNDER SECTION 80HHC. HE THEREFORE DISMISSED THE AP PEAL CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 5. NOW BEFORE US THE LEARNED AUTHORISED REPRESENTAT IVE SUBMITS THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED BY THE ASSESSI NG OFFICER ON THE BASIS OF THE DIRECTION ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-XIV, CHENNAI ON 25-07-2005 WHICH, IN TURN, RELIED ON A LETTER OF THE DY. DIRECTOR OF I.T.A. NO.71/MDS/2011 6 INCOME-TAX (INV.), UNIT-I(3), CHENNAI DATED 10-05-2 005. AS PER THE LEARNED AUTHORISED REPRESENTATIVE, ASSESSEE HAD PARTICIPATE D IN A TENDER ISSUED BY THE CO-OPERATIVE WHOLESALE ESTABLISHMENT, SRI LANKA AND SUCH PARTICIPATION WAS DONE IN THE NAME OF NAFED. LEARNED AUTHORISED REPRES ENTATIVE SUBMITTED THAT ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH NAFED WH EREBY PROCUREMENT OF RICE INCLUSIVE OF OBTAINING THE RELEASE ORDER FROM FCI, FREIGHT CHARGES ETC. WAS THE RESPONSIBILITY OF NAFED AND ACCORDING TO HIM ASS ESSEE WAS SOLELY RESPONSIBLE AND BOUND TO TAKE CARE OF ALL THE EXPORT FORMALITIE S. AS PER THE LEARNED AUTHORISED REPRESENTATIVE ASSESSEE WAS OBLIGED TO N EGOTIATE THE LETTER OF CREDIT FROM ITS BANKERS ON BEHALF OF NAFED AND NAFED WAS TO RECEIVE US $ 1.5 PER METRIC TON AS SERVICE CHARGES. AS PER THE LEARNED AUTHORISED REPRESENTATIVE THE BALANCE AMOUNT WAS TO BE CREDITED IN THE ASSESSEES ACCOUNT. ASSESSEE HAD TO OBTAIN THE MAINTENANCE GURANTEE AND THE PERFORMANCE GUARANTEE AS REQUIRED BY THE BUYER AND NAFED ON 19.11.2001 AGREED TO THE TERM S PUT FORWARD BY THE ASSESSEE FOR UNDERTAKING THE EXPORTS ON A TIE-UP BA SIS. ASSESSEE HAD ON 20-11- 2001 FURNISHED THE MAINTENANCE GUARANTEE TO NAFED AN D THE TIE-UP BETWEEN THE ASSESSEE AND NAFED WAS BROUGHT TO THE NOTICE OF THE BUYER. ACCORDING TO THE LEARNED AUTHORISED REPRESENTATIVE , THE TENDER FOR SUPPLY OF 15000 M. TON OF PARBOILED RICE WAS SUBMITTED BY M/S. ANBU BROTHERS PVT. LTD. WHO WAS THE AGENT OF THE ASSESSEE IN SRI LANKA. LEARNED COUNSEL BROU GHT TO OUR ATTENTION THAT THE EXPORTS WAS MADE PRIMARILY ON ACCOUNT OF SOFT-LINE CREDIT FACILITIES GIVEN TO SRI I.T.A. NO.71/MDS/2011 7 LANKA BY INDIAN GOVERNMENT AND TO OFFLOAD HUGE SURP LUS STOCK OF FOOD GRAINS WITH GOVERNMENT OF INDIA. ARGUMENT OF THE LEARNED AUTHORISED REPRESENTATIVE WAS THAT ASSESSEE WAS ACTING THROUGH ITS COMMISSION AGENT AND WAS IN A POSITION TO GET THE EXPORT ORDER. AS THE ASSESSEE WAS NOT I N A POSITION TO GET THE REQUIRED MONEY, IT ENTERED INTO AN AGREEMENT WITH N AFED. AS PER THE LEARNED AUTHORISED REPRESENTATIVE THE RESPONSIBILITY FOR EX PORT WAS WITH THE ASSESSEE AND NAFED WAS ENTITLED ONLY TO A COMMISSION. REALISATION OF FOREIGN EXCHANGE WAS THROUGH THE ACCOUNT OF THE ASSESSEE. ALL RISKS WER E BORNE BY THE ASSESSEE AND HENCE ACCORDING TO HIM ALL RETURNS SHOULD ALSO COME TO THE ASSESSEE. RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF SEA PEARL INDUSTRIES AND OTHER V. CIT, REPORTED IN 247 ITR 578, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE REALIZATION OF FOREIGN EXCHANGE WAS THE MOST CRITICAL FACTOR AND SUCH FOREIGN EXCHANGE WAS RECEIVED AND CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. 6. ARGUING THAT THE RE-OPENING ITSELF WAS BAD IN L AW, LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER DID NOT APPLY HIS MIND BUT WENT BY THE DIRECTION OF THE ADDL. CIT, RANGE-XIV, CHENNAI. AC CORDING TO THE LEARNED COUNSEL THE ADDL. CIT HAD VIDE HIS LETTER DATED 25-7-2005 D IRECTED THE ASSESSING OFFICER TO TAKE REMEDIAL ACTION TO BRING TO TAX THE ESCAPED INCOME BASED ON A LETTER RECEIVED BY HIM FROM THE DY. DIRECTOR OF INCOME-TAX (INV.), UNIT I(3), CHENNAI. THUS, ACCORDING TO HIM, THE RE-OPENING OF THE ASSES SMENT WAS DONE ON A I.T.A. NO.71/MDS/2011 8 DIRECTION OF A SUPERIOR AUTHORITY, AND WAS INVALID. THERE WAS NO PROPER RECORDING OF REASONS BY THE ASSESSING OFFICER AND THERE WAS N O APPLICATION OF MIND. RELIANCE WAS PASSED ON THE DECISION OF THE HON'BLE PATNA HIGH COURT IN THE CASE OF SHEO NARAIN JAISWAL AND OTHERS V. ITO, (176 ITR 352) FOR ARGUING THAT UNLESS THE ITO FORMED REQUISITE BELIEF REGARDING ESCAPEMEN T OF INCOME OR REGARDING ESCAPEMENT DUE TO OMISSION OR FAILURE ON THE PART O F THE ASSESSEE A RE-OPENING COULD NOT BE RESTORED TO. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V. A. RAMAN & COMPANY (67 ITR 11) FOR ARGUING THAT A DECISION WAS TO BE TAKEN BY THE ASSESSING OF FICER ONLY, AS TO WHETHER AN ASSESSMENT OR REASSESSMENT PROCEEDINGS HAD TO BE RE SORTED TO. AGAIN RELYING ON A DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T V. T.R. RAJAKUMARI (96 ITR 78) LEARNED COUNSEL SUBMITTED TH AT WHEN AN ASSESSING OFFICER WAS NOT HAVING ANY MATERIAL TO SHOW OR SUBS TANTIATE THE ENTERTAINMENT OF A BELIEF OF ESCAPEMENT OF INCOME, A RE-OPENING OF ASSESSMENT SIMPLY DONE ON THE DIRECTION OF THE CIT, WAS WITHOUT JURISDICTION. THEREFORE, ACCORDING TO THE LEARNED COUNSEL NOT ONLY THE RE-OPENING WAS INVALID . ON MERITS, LEARNED AUTHORISED REPRESENTATIVE ONCE AGAIN SUBMITTED THAT THE ASSESSEE HAVING EXPORTED RICE AND RECEIVED FOREIGN EXCHANGE FROM TH E BUYER, WAS WELL ENTITLED TO THE CLAIM THE DEDUCTION U/S 80HHC OF THE ACT. 7. PER CONTRA, THE LEARNED DR SUBMITTED THAT THE RE -OPENING WAS NOT DONE AT THE BEHEST OF ANY SUPERIOR AUTHORITY. AS PER THE L EARNED DR, THE DY. DIRECTOR OF I.T.A. NO.71/MDS/2011 9 INCOME-TAX (INV.) WAS NOT A SUPERIOR AUTHORITY OF T HE ASSESSING OFFICER. AGAIN HE POINTED OUT THAT THE ADDL. CIT WAS ONLY ADMINIST RATIVE AUTHORITY OVER THE ASSESSING OFFICER. FURTHER AS PER THE LEARNED DR A READING OF THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY SHOWED TH AT HE HAD APPLIED HIS MIND. IN ANY CASE ACCORDING TO HIM, IN THE LIGHT OF THE D ECISION OF THE HON'BLE APEX COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCO ME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD. (291 ITR 500), EARLIER DECISI ONS CITED BY THE LEARNED AUTHORISED REPRESENTATIVE WHICH WERE ALL BASED ON T HE PRE-AMENDED PROVISIONS OF SECTION148, I.E. PRIOR TO THE SUBSTITUTION MADE THROUGH DIRECT TAX LAWS (AMENDMENT) ACT, 1987, HAD NO RELEVANCE WHATSOEVER . ACCORDING TO HIM, ADMITTEDLY HERE, THE ORIGINAL RETURN WAS SUBJECTED TO PROCESSING U/S. 143(1) AND THERE WAS NO QUESTION OF ANY OPINION BEING FORMED B Y THE ASSESSING OFFICER. THE POWERS OF AN ASSESSING OFFICER WHERE THE ORIGIN AL RETURN WAS PROCESSED U/S. 143(1), FOR RE-OPENING OF THE ASSESSMENT WERE DRAST ICALLY WIDER THAN SUCH POWERS WHICH COULD BE EXERCISED IF THE ORIGINAL RET URN WAS PROCESSED U/S. 143(3) OF THE ACT, AFTER A SCRUTINY. ACCORDING TO HIM, IN THE GIVEN CASE THE ASSESSING OFFICER HAD NOT COME TO ANY OPINION AT THE STAGE OF PROCESSING OF THE RETURN. WHEN HE FOUND THAT THE CLAIM MADE BY THE ASSESSEE F OR DEDUCTION U/S 80HHC ON EXPORTS MADE BY NAFED, ON WHICH NAFED HAD ALSO MADE A CLAIM UNDER SECTION 80HHC, WAS PALPABLY NOT ALLOWABLE, BASED ON INFORMA TION RECEIVED FROM THE I.T.A. NO.71/MDS/2011 10 INVESTIGATION WING, HE HAD TAKEN THE RIGHT STEP OF RE-OPENING ALLOWED UNDER THE STATUTE. 8. INSOFAR AS THE MERITS OF THE CASE WAS CONCERNED , LEARNED DR SUBMITTED THAT THE ORDER WAS IN THE NAME OF NAFED AND THE RELA TED THE EXPORT DOCUMENTS WERE ALL IN THE NAME OF NAFED. THE INVOICES WERE IN THE NAME OF NAFED, SHIPPING BILLS WERE IN THE NAME OF NAFED AND NAFED H AD NOT GIVEN ANY DISCLAIMER BUT ON THE OTHER HAND CLAIMED DEDUCTION UNDER SECTION 80HHC ON THESE EXPORTS. ASSESSEE HAS NOT SATISFIED ANY OF T HE CONDITIONS FOR CLAIMING THE DEDUCTION UNDER SECTION 80HHC AND THE ASSESSING OFF ICER AND THE LEARNED CIT(A) WERE PERFECTLY JUSTIFIED IN DENYING SUCH CLAIM. FO R HIS CONTENTION THAT ASSESSEE WAS NOT ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER S ECTION 80HHC WITHOUT A CERTIFICATE FROM THE MAIN EXPORTER, RELIANCE WAS PL ACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF MINERAL & METAL T RADITION CORPORATION V. R.C. MISHRA AND OTHERS (SUPRA). 9. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORIT IES. FIRST WE WILL TAKE UP THE ISSUE REGARDING REOPENING OF ASSESSMENT. RETUR N FILED BY THE ASSESSEE WAS ORIGINALLY PROCESSED UNDER SECTION 143(1). RE-OPEN ING UNDER SECTION 147 WAS DONE WITHIN A FOUR YEAR PERIOD FROM THE END OF THE RELEVANT ASSESSMENT YEAR. BASIS ON WHICH THE RE-OPENING WAS DONE IS CLEAR FRO M THE REASONS RECORDED BY THE ASSESSING OFFICER WHICH RUNS AS UNDER : I.T.A. NO.71/MDS/2011 11 THE COMMUNICATION RECD. FROM THE DDIT(INV.), UNI T-I(3), CHENNAI IN LETTER NO. IW/U-I(3)/EXPORT PREMIUM/2005- 06 DATED 10/05/05 IS ON FILE. THE INFORMATION REPORTED IN P ARAS 3,4 & 5 (WHICH ARE SELF-EXPLANATORY) PRIMA FACIE SUGGESTS T HAT THE CLAIM OF 80HHC OF THE A IS NOT CORRECT. I HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF TH E A DUE TO WRONG/EXCESS CLAIM OF DEDUCTION U/S 80HHC. IN ORDE R TO BRING THE SAME TO TAX, A NOTICE U/S 148 IS ISSUED. OFFIC E PLEASE ISSUE NOTICE U/S 148 & PUT UP. ASSESSING OFFICER RELIED ON THE INFORMATION IN PAR A 3,4 & 5 OF THE COMMUNICATION RECEIVED FROM DY. DIRECTOR OF INCOME-TAX (INV.). T HE RELEVANT PARAS 3,4 & 5 OF THE LETTER DATED 10-05-2005 ARE REPRODUCED HEREUNDE R : GOVERNMENT OF INDIA OFFICE OF THE DEPUTY DIRECTOR OF INCOMETAX (INV),UNIT I(3) NEW BUILDING (2 ND FLOOR)NO. 108, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. NO. IW/U-I(3)/EXPORT PREMIUM/2005-2006 DATED : 10/05 /2005 TO THE ADDL. COMMISSIONER OF INCOMETAX, BUSINESS RANGE XIV, CHENNAI. SIR, SUB : WRONG CLAIM OF DEDUCTION U/S 80HHC IN THE CA SE OF M/S. CAPRO CONNECTIONS, PROP. PHILIP S. SAKTHIVEL, 1220, 20 TH I.T.A. NO.71/MDS/2011 12 MAIN ROAD, ANNA NAGAR WEST, CHENNAI-40 FORWARDING OF REPORT REG. * * * * * * * * * * * 3. AS PER THE RETURN OF INCOME FILED FOR THE A.Y. 0 2-03, THE ASSESSEE HAS SHOWN A SUM OF ` 1,65,85,263 AS INCOME RECEIVED TOWARDS SERVICE CHARGES ON COMMISSION FROM M/S. NAF ED AND CREDITED THE SAME IN THE P & L A/C. APART FROM THI S, AS SEEN FROM THE TRADING ACCOUNT, THE ASSESSEE HAD EXPORTED FOOD GRAINS TO CEYLON TO THE TUNE OF ` 5,50,66,078 AND MADE LOCAL SALES TO THE TUNE OF ` 9,37,770. FURTHER, AS PER THE TRADING ACCOUNT, TH E ASSESSEE HAS ARRIVED AT THE GROSS PROFIT AT ` 10,79,370. 4. AS SEEN FROM THE ABOVE, IT IS QUITE CLEAR THAT T HE ASSESSEE HAS ADMITTED A GROSS PROFIT OF ` 10,79,370 FROM EXPORT AND LOCAL SALES OF AGRICULTURAL GOODS. BESIDES, THE ASSESSEE HAS ADMITTED INCOME FROM SERVICE CHARGES AND COMMISSION FROM NAF ED TO THE TUNE OF ` 1,65,85,263. AS SEEN FROM THE P & L A/C., AFTER ADJUSTING THE EXPENSES, THE NET PROFIT HAS BEEN QUA NTIFIED AT ` 1,.36,42,436 WHICH INCLUDES SERVICE CHARGES AND COM MISSION RECEIVED FROM NAFED OF ` 1,65,85,263. AS SUCH, PRIMA FACIE, IT APPEARS THAT THE ASSESSEE HAD INCURRED A LOSS ON EX PORT OF AGRICULTURAL GOODS. ACCORDINGLY, WHATEVER NET PROF IT THE ASSESSEE HAS SHOWN OF ` 1,36,42,436 HAS BEEN DERIVED FROM SERVICE CHARGES AND COMMISSION RECEIVED FROM NAFED. 5. HOWEVER, IN THE COMPUTATION SHEET, THE ASSESSEE HAS TREATED THE ENTIRE TAXABLE INCOME OF ` 1,33,67,899 AFTER MAKING CERTAIN ADJUSTMENTS AS INCOME DERIVED FROM THE EXPO RT OF AGRICULTURAL GOODS AND FURTHER CLAIMED DEDUCTION CL AIMED U/S. 80- HHC. THIS CLEARLY INDICATES THAT THE ASSESSEE HAS WRONGLY TREATED THE SERVICE CHARGES AND COMMISSION INCOME RECEIVED FROM NAFED IN INDIA AS EXPORT PROFITS AND CLAIMED THE DEDUCTIO N WHICH IS AGAINST LAW. 10. TWO THINGS CLEARLY COME OUT OF THE ABOVE. FIRS T OF ALL ASSESSING OFFICER HAD NOT ACTED AS PER THE DIRECTIONS OF THE ADDL. CI T, RANGE-XIV, CHENNAI BUT HAD BASED HIMSELF UPON THE COMMUNICATION FROM DY. DIREC TOR OF INCOME-TAX (INV.). I.T.A. NO.71/MDS/2011 13 ASSESSING OFFICER HAD COME TO A CONCLUSION THAT THE INFORMATION REPORTED IN PARAS 3,4 & 5, EXTRACTED ABOVE, WERE NOT ONLY SELF- EXPLANATORY BUT ALSO SUGGESTED THAT ASSESSEES CLAIM U/S. 80HHC WAS NOT CORRECT. THUS WE DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE LEARNED AUTHO RISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAD SIMPLY GONE BY THE DIRECTIONS OF THE ADDL. CIT. NO DOUBT, THE ADDL. CIT HAD DIRECTED THE ASSESSING OFFICER TO TAKE REMEDIAL ACTION AND TO BRING TO TAX ESCAPED INCOME BY HIS LETTER DATED 25. 7.2005. BUT NEVERTHELESS THE ASSESSING OFFICER HAD GONE THROUGH THE INFORMATION RECEIVED FROM THE DY. DIRECTOR OF INCOME-TAX (INV) AND FOUND THAT THERE W AS A REASON FOR INITIATING RE- ASSESSMENT PROCEEDINGS AND THEREAFTER ISSUED NOTICE U/S. 148 OF THE ACT. NO DOUBT, HON'BLE PATNA HIGH COURT IN THE CASE OF SHEO NARAIN JAISWAL AND OTHERS, SUPRA, HAD OPINED THAT AN ASSESSING OFFICER HIMSELF HAD TO FORM THE REQUISITE BELIEF. HON'BLE APEX COURT HAD ALSO HELD IN THE CA SE OF A. RAMAN & CO., SUPRA, THAT THE DECISION FOR INITIATING RE-ASSESSMENT PROC EEDINGS HAD TO BE TAKEN BY THE ASSESSING OFFICER AND NOT BY A SUPERIOR AUTHORITY. BUT AS NOTED BY US, HERE THE ASSESSING OFFICER HIMSELF HAD COME TO A DECISION FO R DOING A RE-ASSESSMENT AND HE WAS NOT GOING BY THE DIRECTIONS OF ANY SUPERIOR AUTHORITY. IN ANY CASE THE ABOVE DECISIONS AS WELL AS THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT IN THE CASE OF T.R. RAJAKUMARI, SUPRA, VEHEMENTLY RELI ED ON BY THE LEARNED AUTHORISED REPRESENTATIVE WERE ALL RENDERED PRIOR T O THE SUBSTITUTION OF SECTION 148 BY DIRECT TAXES (AMENDMENT) ACT, 1987. THE HON 'BLE APEX COURT HAD I.T.A. NO.71/MDS/2011 14 CONSIDERED THE EFFECT OF THE SUBSTITUTED SECTION AN D THE REQUIREMENTS THAT WERE TO BE MET FOR RE-OPENING WHEN THE ORIGINAL RETURN W AS PROCESSED U/S. 143(1) IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD., S UPRA. HON'BLE APEX COURT IN PARAS 13 TO 17 OF THE ABOVE MENTIONED ORDER HELD AS UNDER : 13. ONE THING FURTHER TO BE NOTICED I S THAT INTIMATION UNDER S . 143(1)(A) IS GIVEN W I T H OUT PREJUDIC E T O THE PROVI S IONS OF S . 143(2). TH O UGH TECHNICALLY THE INTIMATION ISSUED WAS DE EM ED TO B E A DE MAND NOT I CE I S S UED UNDER S. 156 , THAT DID NOT PER SE PREC L UDE THE R I GHT OF TH E AO T O PROCEED UNDE R S. 143 ( 2) . THAT R I GHT IS PRESER V ED AND I S NOT TAKEN AWAY. BETWEEN THE PER I O D FR O M 1 S T APR IL, 1 9 8 9 TO 31 S T MARCH , 1998 , THE SECOND PROVISO TO S. 143(1)(A), REQUIRED THAT WHE RE A DJU S TMENT S W ERE MADE UNDER THE FIRST PROVISO T O S . 143(1)(A) , AN INTIMATION HAD TO BE SENT TO TH E ASSESSEE N OTWITHSTANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH AD J U S T MENTS. W I TH EFFECT FROM 1ST APRIL , 1998 , THE SECOND PROVISO TO S. 143(1)(A) WAS SUBSTITUTED BY TH E F INANCE ACT, 1 99 7, WHICH WAS OPERATIVE TILL 1ST J U NE , 1999 . THE REQUIREMENT WAS THAT AN INTIMA T ION WAS TO B E S ENT T O THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAD BEEN MAD E UNDER THE FIR ST PR OVISO TO S. 143 ( 1) AND NOTWITHSTANDING THAT NO TA X OR INTEREST WAS FOUND DUE FROM THE ASSE SSEE CONCERNED . B ET WEEN 1 S T APRIL , 1998 AND 31ST MAY, 1999, SENDING OF AN INTIMATION UNDER S. 143(1)( A ) WA S M A N DATORY . THUS , THE LEGISLATIVE INTENT IS VERY CLEAR FROM THE USE OF THE WORD ' INTI MAT I ON ' A S S UBST I TUTED FOR ' ASSESSMENT' THAT T W O DIFFERENT CONCEPTS EMERGED. WHILE MAKING AN ASS ESSMENT , T H E AO IS FREE TO MAKE ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESS EE . BY MAKING AD J U S TMENT S UNDE R THE FIRST PROV I SO TO S . 143 ( 1 )( A) , NO ADDIT I ON WHICH I S I MPER MISSI BL E BY TH E I NFO RMATION GIVEN I N THE RETURN COULD BE MADE BY THE AO. THE REASON IS THAT UNDER S. 1 43( 1)(A ) NO OP PORTUN I TY IS GRANTED TO THE ASSES S EE AND THE AO PROCEEDS ON HIS OPINION ON TH E BA SI S OF THE R ETURN FILED BY THE ASSESSEE . THE VER Y FACT THAT NO OPPORTUNITY OF BEING HEARD IS GIVE N U NDER S. 143 (L)( A ) IND I CATES THAT THE AO HAS T O PROCEED ACCEPTING THE RETURN AND MAKING T HE PERM I SSIBL E ADJUST MENT S ONLY. AS A RESULT OF INSERTION OF THE E X PLANATION TO S . 143 BY THE FINANC E ( NO . 2) AC T OF 1 9 91 W . E. F. 1ST OCT. , 1991 , AND SUB S E QUENTLY W . E . F . 1ST JUNE, 1994 , BY THE FINANCE ACT , 1 99 4, AND U L T IM ATE L Y OMITTED W.E . F . 1ST JUNE , 1 9 99 , BY THE EXPLANATION AS I NTRODUCED BY THE F I NANCE ( NO . 2 ) ACT OF 1 9 91 AN I NTIMATION SENT TO TH E ASSESSEE UNDER S . 143(1 ) (A) WAS DEE M ED TO BE AN OR DER F O R TH E PUR PO SES OF S . 246 BETWEEN 1ST J UNE, 1994, TO 31ST MAY, 1999, AND UND E R S . 264 BETWE E N 1ST OCT . , 19 9 1 , AND 3 1ST MAY , 1999 . IT IS TO BE NOTED THAT THE EXPRES S IONS ' INT I MATI ON ' AND ' AS S ESSMENT OR D ER ' HAVE BEEN USED A T DIFFERENT PLACES. THE CONTEXTUA L DIFFERENCE B ET W EE N I.T.A. NO.71/MDS/2011 15 THE TWO EX PR ESSI ON S H AS TO BE UNDERSTOOD I N THE CONTEXT THE EXPRESSIONS ARE USED. ASSESS MENT IS U S ED A S M EAN I NG S OMETIM ES ' THE COMPUTATIO N OF INCOME ' , SOMETIMES 'THE DETERMINATION OF THE AMOUNT OF TA X P AYABL E' AND S OMETIMES 'THE WHOLE PROCEDURE LAID DOWN IN THE ACT FOR IMPOSIN G L I ABILITY UPON T H E TAX PAYER' . I N TH E S CHEME OF TH I NGS , AS NOTED ABOVE, THE I NT I MATION UNDER S. 14 3(1)( A ) CANNOT BE TRE ATED TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT B Y TH E STATUTOR Y PROV I SIO N S A S T H E Y S TOOD AT DIFFERENT PO I NTS OF TIME . UNDER S . 143(1)(A) AS IT STOOD P RIOR T O 1S T APR I L , 19 8 9 , TH E AO H AD TO PA SS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETUR N , B UT U ND ER TH E AMEN D E D PROV IS IO N, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER H A S B EEN DI S PENSE D WI T H AND I NS TEAD A N INT I MATION I S REQUIRE D TO BE SENT . VARIOUS CIRCULARS SENT BY THE CB D T S PELL OU T T H E IN TENT OF T HE L E GI S LATURE , I.E. , TO MI N IMI Z E THE DEPARTMENTAL WORK TO S C R UTINIZE EAC H AND EV E RY R E T URN AND TO CONCENTRATE ON SELECTI V E SCRUTINY OF RETURNS . THESE ASPECTS WERE HIGH LIGH T E D BY ONE OF US ( O. K . JAIN , J.) IN APOGEE INTE R NATIONAL LTD . VS. UNION OF INDIA (1997) 137 CTR ( DEL ) 9 3 : ( 19 96 ) 220 ITR 248 (DEL) . IT MAY BE NOTED ABOVE THAT UNDER THE FIRST PROVIS O TO T HE NEWLY S UBS T I TUTED S . 14 3 (1) , W.E . F . 1ST JUNE , 1999, EXCEPT AS PROVIDED IN THE PROV ISION I T S ELF, TH E ACKNOW LEDGEMENT OF TH E RETURN SHAL L BE DEEMED TO BE AN INTIMATION UNDER S. 1 4 3( 1) WHERE ( A ) E ITHER N O S UM IS PAYABLE BY THE ASSESSEE , OR (B ) NO REFUND IS DUE TO HIM . IT IS SIGN IFIC ANT THAT THE ACKNO W LE DG E M EN T I S NOT DONE BY AN Y AO, BUT MOSTLY BY MINISTERIAL STAFF . CAN IT B E S AI D THAT AN Y ' ASSESS MENT ' IS DONE BY THEM? THE REPLY IS AN EMPHATIC ' NO'. THE INTIMATION UND ER S . 14 3(1) ( A ) W A S D EEMED TO BE A NOT I CE OF DEMAND UNDER S. 156 , FOR THE APPARENT PURPOSE OF MAK I NG MACHINERY PRO V IS IONS R ELAT I NG TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDIC A TE D TO B E P AYABLE I N THE I NTIMATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRED FRO M T H E D EE M I N G P ROV IS ION . THEREFORE, THERE BEING NO ASSESSMENT UNDER S. 143(1)(A), THE QUESTIO N OF C HANGE OF O P I NI O N , A S C ONTENDED, DOE S NOT ARISE . 14. ADDIT I ONALLY, S. 148 AS PRESENT L Y S TANDS IS DIFFERENTLY COUCHED IN LANGUAGE FRO M W HAT W A S E A RLIER T HE POSITION. PRIOR TO THE SUB S TITUTION BY THE DIRECT TAX LAWS (AMENDMENT ) A CT, 1 9 8 7 , T H E PR O VISI ON READ AS FOLLOWS : ' 148 . ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT .-( L ) BEFORE MA KING T H E A SS ES SMENT , R EASSESSMENT OR RECOMPUTATION UNDER S . 147 , THE AO SHALL SERV E ON TH E ASS E SS E E A NOT I C E CONTAINING ALL O R ANY OF THE REQU I REMENTS WHICH MAY BE INC L UDED I N A NOTICE U N D ER SUB -SO (2) O F S. 139 ; AND THE PROVISIONS OF TH IS A C T SHALL , SO FAR AS MAY BE , APPLY ACCORD I NGLY AS IF T HE NOT I C E WE RE A NOT I CE I S SUED UNDER THAT S UB -S E C T I ON . 15 . S E C. 147 PRIOR TO ITS SUBSTITUTION BY THE DIRECT TAX LAWS (AMENDMENT ) ACT , 198 7 , S TOOD A S F O LL OW S: ( A ) TH E AO HA S REA S ON TO BELIEVE THAT , BY REASON OF THE OM I SSION OR FA IL U RE I.T.A. NO.71/MDS/2011 16 ON THE PA RT O F A N ASS E SS EE TO M A K E A RETURN UNDER S . 139 FOR ANY ASSESSMENT YEAR TO THE AO OR TO D I SCLOSE FUL L Y AND TR ULY A LL MAT E R I AL FACTS NECESSAR Y FOR HIS ASSESSMENT FOR THAT YEAR , INCOME C HA R G E ABLE T O T A X H A S ESC APED ASSE SS MENT FOR THAT YEA R , OR ( B ) N OTW I TH S TAND I NG T HA T THERE H A S BEEN NO OM I SSION OR FAILURE AS MENT I ON E D IN CL . (A) ON TH E PA R T OF THE A SS E S SEE , THE AO HAS I N C O NSEQUENCE OF INFORMATION IN HIS POSSESSION R EASON TO B E L IE VE THAT INC O ME C H A RGEABLE TO TA X HAS E SC APED ASSESSMENT FOR ANY ASSESSMENT YEA R, HE MA Y , S UB JE CT T O THE PROV I SION S OF S S . 148 TO 15 3, ASSESS OR REASSESS SUCH INCOME O R RE CO M P U TE THE L OSS OR TH E DEPRECIATION ALLO W ANCE, AS THE CASE MAY BE , FOR THE ASSE S SM E N T Y E AR C ONCE R N E D ( HERE AF TER IN SS . 148 TO 15 3 REFER R ED TO AS THE RELEVANT ASSESSMENT YEAR ) . EXPLA NAT I O N 1 . : FOR T HE PURPOSES OF THIS SECTION , THE FOLLOWING SHALL AL S O BE DEEMED TO B E C A S E S WHERE I N C OM E C HARGEABLE TO TAX HA S ESCAPED ASSESSMENT, NAMELY : (A) WHERE INCOME CHARGEABLE TO TAX HAS BEEN UNDERAS SESSED; OR (B) WHERE SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE; OR ( C) WHE RE S UC H I NCOM E HAS BEE N MADE THE SUBJECT OF E X CESSIVE RELIEF UNDER TH IS ACT OR U NDE R THE IN D I AN IT ACT , 1 9 22 (11 OF 1922 ); OR (D) WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED. EXP LANA TI ON 2. : PRODUCTION BEFOR E T H E AO OF ACCOUNT BOOK S O R OTHER EV I DENCE FROM W HICH M A TERI A L EVIDENCE C O UL D W I TH DU E D I L I GEN CE H A V E BE EN D IS COVERED B Y T H E AO WILL NOT N ECESSARI LY AMOUNT T O DISC LO S UR E WITH I N T H E MEAN I NG OF T H IS S ECTION .' 16. S EC . 1 4 7 AUTHORISES AND PERM I TS THE AO TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX I F HE H A S RE AS O N TO BELI E VE T HAT I NCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED AS S E SSM EN T . THE WO R D ' REAS ON ' I N THE PHRAS E ' REASON TO BEL I EVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF TH E AO HAS CAU S E OR J U S T I FICATION TO KNOW O R S UPPO S E THAT I NCOME HAD ESCAPED ASSESSMENT , IT CAN BE S AID T O H AV E REAS ON T O BELI E V E T HAT AN I NCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CA NNO T BE RE AD TO ME AN THAT T H E AO SHOU L D HAVE F I NALLY AS C ERTA I NED THE FACT BY LEGAL EVIDENCE OR C ONC L U SION . THE FUNCTION O F THE AO IS T O AD MI N I STER THE STATUTE W I TH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH A N IN BU ILT I D EA OF FAIRNESS T O T A X PAYERS. AS OBSERVED BY THE DELHI HIGH COURT I N CENTRAL P R OV I N C E S MANG ANE SE O RE CO . LTD . VS. I TO (1 99 1) 9 8 CTR ( SC ) 161 : ( 1991 ) 191 I TR 662 (SC ), F O R I N I TIAT I O N O F ACTI O N UN D ER S . 147( A ) (AS TH E PROV I S I ON STOOD AT THE RELEVANT TIME) FULFILMENT OF THE TWO R E QU IS I TE C OND I T I ON S IN THAT RE G A RD IS E S S ENT I A L . AT THA T S T AGE , THE F I NAL OUTCOME OF THE PROCEE DIN G IS I.T.A. NO.71/MDS/2011 17 N O T RELEVANT. IN OTHER WORDS , AT THE I NITIAT I ON STAGE, WHA T IS REQUIRED I S ' REASON TO BEL I EVE ' , BUT NOT THE ESTA BLISHED FA C T O F E SCAPEMENT OF I NCOME . AT THE STAGE OF ISSUE O F NO T ICE , T HE ONLY QUE S T I O N IS W H E TH ER THERE W A S RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COUL D HAVE FORMED A R E Q U ISI TE BE L I EF . WHE THER TH E MATERIALS WOULD CONCLUS I VELY PROVE THE ESCAPEMENT I S NOT THE C ONCER N A T TH AT S TAG E . THIS IS S O BECAUSE THE FORMATION OF B E LIEF BY THE AO IS WITHIN THE REALM OF SUB J ECTIV E S ATISF AC TI ON [S EE I TO VS. SELECTED DALURBAND COAL C O . (P) LTD. (1996) 132 CTR (SC ) 1 62 : (1996 ) 2 17 I TR 5 9 7 ( S C) ; RAYMOND WOOLLEN MILLS LTD. VS . ITO (1999) 152 CTR (SC) 418 : (1999) 236 IT R 34 ( SC )) . 17 . T HE S COPE AND EFFECT OF S . 147 AS SUBSTITUTED WITH EFFECT FROM 1S T AP R IL, 1 98 9 , A S ALSO SS. 148 TO 152 AR E S UBSTANTIALLY DIF F ERENT FROM THE PROVISIONS AS THEY STOOD P RIO R TO S UC H SUB S TITU T IO N . U NDER THE OLD PROVISIONS OF S . 147, SEPARATE CLS. (A) AND (B) LAID DOWN TH E CI RCUM S TANCE S U N D ER W H IC H I NCOME ESCAPING ASSES S MENT FOR THE PAST ASSESSMENT YEARS COULD BE ASS E S SED OR REASSESSED . T O C ONFER JUR I SD I CTION UNDER S. 147(A) TWO CONDIT I ONS WERE REQU I RED TO BE S ATIS FIED F IRS TLY THE AO MUS T HAV E REASON TO BELIEVE THAT I NCOME PROF I TS OR GAINS CHARGEABLE TO IN COME- TA X HAVE ES CAPED A SS ESSMENT , AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH E SC A PE M E NT HA S OCCU R R E D B Y REASON OF EI THER ( I ) OM I SSION OR FAILURE ON THE PART OF THE ASSESSEE TO D ISCL O SE FULLY OR T R UL Y A LL M ATERIAL FAC T S NECESSARY FOR H IS ASSESSMENT OF THAT YEAR. BOTH THESE COND I T I O NS WERE COND I T I ON S PRECEDEN T T O B E SATISF I ED BEFORE THE AO C OULD HAVE JURISD I CTION TO I SSUE NOTIC E UN DE R S. 1 4 8 R/W S . 14 7 ( A ) . BU T UNDER T HE SUBSTIT U TED S. 1 47 E XI STENCE OF ONLY THE F I RST COND ITION S U F FICE S . I N O T HE R W ORD S IF THE AO FOR WHATEVER REASON HAS REASON T O BELIEVE THAT I NCOME HA S ESCAPE D ASS ESSME NT IT CONFERS JU RIS D I CT I ON TO REOPEN T H E ASSESSMENT . IT IS HOWEVER TO BE NOTED THA T B O TH T H E C ONDI T I ON S M U ST BE FULF I LLED IF TH E CASE FA L L S WITHIN THE AMBIT OF THE PROV I SO TO S. 1 4 7 . THE CASE AT HAND IS C OV ERE D BY THE MAIN PROV I S I ON A N D NOT THE PROVISO. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE OPINION T HAT THE ASSESSING OFFICER WAS WELL JUSTIFIED IN RESORTING TO THE RE-OPENING OF TH E ASSESSMENT, THE ORIGINAL RETURN HAVING BEEN SUBJECTED TO ONLY A PROCESSING UNDER SE CTION 143(1) OF THE ACT. 11. COMING TO THE MERITS OF THE CLAIM OF THE ASSESS EE, THE PAPER BOOK FILED BY THE ASSESSEE AT PAGE NO.8 WOULD CLEARLY SHOW THAT T HE LETTER OF CREDIT WAS OPENED BY THE BUYER IN THE NAME OF NAFED. WE FIND T HAT THE CLAIM OF THE I.T.A. NO.71/MDS/2011 18 ASSESSEE FOR DEDUCTION U/S. 80HHC RELIES MAINLY ON THE PLEA THAT THE FOREIGN EXCHANGE RECEIVED ON THE SALE WAS CREDITED TO ITS A CCOUNT. BUT NEVERTHELESS THE TENDER FOR THE SUPPLY WAS SUBMITTED BY NAFED AND THE AUTHORIZATION TO M/S. ANBU BROTHERS PVT. LTD. FOR COLLECTING AND SUBMITTI NG THE TENDER WAS ALSO GIVEN BY NAFED. PAGE 19 OF THE PAPER BOOK IS A LETTER ADD RESSED BY NAFED TO THE CO- OPERATIVE WHOLESALE ESTABLISHMENT, COLOMBO, THE BUYE R IN THIS REGARD. THE CONTRACT WAS BETWEEN NAFED AND THE BUYER. COPY OF T HE CONTRACT HAS BEEN FILED BY THE LEARNED DR. THE SAID CONTRACT SAYS THAT PAR BOILED RICE WAS TO BE SUPPLIED BY NAFED TO CO-OPERATIVE WHOLESALE ESTABLISHMENT OF S RI LANKA. THE RESPONSIBILITY FOR GIVING THE PERFORMANCE GUARANTEE ALSO WAS WITH NAFED. RELEVANT TERMS OF THIS AGREEMENT DATED 28-11-2001 ARE REPRODUCED HEREUNDER FOR BREVITY : CONTRACT NO. SI/RI/91/TL/CI THE CONTRACT IS MADE BETWEEN M/S.NATIONAL AGRICULTU RAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD , CRESCENT COURT,11 FLOOR , 963,POONAMALEE HIGH ROAD, CHENNAI 600 084 INDIA (HEREINAFTER CALLED THE SELLER) WHO A GREED TO SELL AND THE BOARD OF DIRECTORS OF THE CO-OPERATIVE WHOLESALE ESTABLISHME NT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA (HEREINAFTER CALLED THE BUYER ) WHO AGREED TO BUY THE FOLLOWING QUANTITY OF PAR BOILED RICE UPON THE TERMS, CONDIT IONS AND PRICE HEREIN SPECIFIED: 1. GOODS INDIAN ORIGIN PAR BOILED RICE 2. QUANTITY 15,000 M TONS +/- 5% (FIFTEEN THOUSAN D METRIC TONS PLUS MINUS FIVE PERCENT) 3. SPECIFICATIONS INDIAN ORIGIN PAR BOILED RICE OF CURRENT CRO P NON GLUTINOUS VARIETY, BROKENS NOT EXCEEDING 15% MOISTURE MAX 14% DAMAGED AND DISCOLOU RED GRAINS MAX 2% I.T.A. NO.71/MDS/2011 19 ADMIXTURE MAX 2%. FOREIGN MATTER MAX, 0.5% BELLY WH ITE GRINS MAX 5% PADDY GRAINS MAX 30 PER 1 KG MOULDYNESS FREE --- INFEST ATION FREE. GRAINS BELOW OF THE SIZE OF A FULL GRAIN SHA LL COUNT AS BROKEN GRINS. SHOULD BE COMPLETELY FREE FROM LIVE INSECTS AND SHOULD BE 100% FIT FOR HUMAN CONSUMPTION. THE RICE CONSIGNMENT SHOULD ALSO BE IN STRICT CO NFORMITY WITH THE SAMPLE SUBMITTED AT THE TIME OF OPENING THE TENDER WHICH CONFORMS TO TH E TENDER SPECIFICATIONS. 4. PACKING IN STRONG NEW, SOUND JUTE BAGS OR POLYPROPYLENE BAG S CONTAINING 30 KGS --- OF INDIAN ORIGIN PAR BOILED RICE BAGS SHOULD BE CLOSE LY WOVEN AND FIRMLY DOUBLE STITCHED WITH STRONG THREAD. PACKING SHOULD BE FIT FOR MANUALLY HANDLING, LOADING, TRANSPORTING AND DISCHARGING. THE BAGS SHALL BE ADE QUATELY STITCHED WITH STRONG THREAD AND CAREFULLY AND SECURELY KNOTTED. ANY BAGS WHICH ARE WEAK, OLD, TON OR UNSERVICEABL E FOR TRANSIT OR THE STITCHING OF WHICH IS INADEQUATE OR WHICH BURST WHILE LOADING SHALL BE REPLACED BY THE SELLER WITHOUT ANY CHARGE. . .. 5. BRANDS AND /OR MARKS BAGS SHOULD BUYERS DISTINCTIVE MARKS CWE COL OMBO IN ADDITION TO THE SELLERS DISTINCTIVE MARKS IF ANY. NET AND GROSS WE IGHT ALSO SHOULD BE CLEARLY PRINTED ON EACH BAG. CONTRACT NUMBER SHOULD ALSO BE PRINTED. 6. DESTINATION SAFE BERTHS SAFE PORT SRI LAN KA 7. INSPECTION FOR QUALITY AND WEIGHT THE RICE WILL BE INSPECTED AT THE MILLS/STORES AND PRIOR TO LOADING ON VESSELS, AND ALSO ON BOARD THE VESSEL BY AN INTERNATIONALLY RECOGNIZED SURVEYOR APPOINTED BY THE BUYER AT BUYERS EXPENSE FOR: A) QUALITY AND SPECIFICATIONS BASED ON A MINIMUM OF 0. 5% OF THE BAGS COMPRISING THE SHIPMENT AND B) WEIGHT AND CONDITION OF THE PACKING AND TARE OF BAG S ON A MINIMUM OF 5% OF THE BAGS COMPRISING THE SHIPMENT. 8. SHIPMENT TUTICORIN OR ANY INDIAN PORT ---------- I.T.A. NO.71/MDS/2011 20 ----------- IV) THE SELLER SHOULD ENSURE THE ARRIVAL OF EACH PA RCEL DURING THE SPECIFIED PERIOD IN SRI LANKA ONCE THE PURCHASE IS CONFIRMED , THE PORT OF LOADING IS DECLARED BY THE SELLER. ----------------- D) VESSELS USED SHOULD BE WITHIN THE DISCHARGE POR T/BERTH LIMITATIONS AND SHOULD NOT BE OLDER THAN 20 YEARS. IF THE AGE OF TH E VESSEL IS OVER 15 YEARS AND NOR OVER 20 YEARS INSURANCE -------- ----------- H) IMMEDIATELY AFTER COMPLETION OF LOADING TH E SELLER SHOULD FURNISH THE FOLLOWING DETAILS BY TELEX/FAX TO THE BUYER. 1. NAME OF THE VESSEL AND FLAG 2. PORT OF LOADING 3. EXPECTED TIME OF DEPARTURE 4. EXPECTED TIME OF ARRIVAL AT DISCHARGE PORT 5. COMMODITY SHIPPED 6. GROSS WEIGHT IN M/TONS 7. NET WEIGHT IN M/TONS 8. NO. OF BAGS SHIPPED ON BOARD 9. TOTAL C&F VALUE OF THE NETT CARGO IN US $ 10. L/C NO. 11. SALES CONTRACT NO. 12. B/L NO. AND DATE. I) INTERNATIONALLY RECOGNIZED INDEPENDENT SURVEYOR SHALL BE APPOINTED BY THE BUYER TO PERFORM INSPECTION AT THE MILLS/STORES AND PRIOR TO LOADING ON VESSEL AND ALSO ON BOARD THE VESSEL AT BUYERS EXPENSE FOR QUA NTITY, SPECIFICATION, WEIGHT, CONDITION OF PACKING AND TARE OF BAGS ETC. THE INSP ECTION WILL ALSO BE PERFORMED TO CHECK WHETHER THE CONSIGNMENT BEING LOADED IS ST RICTLY IN CONFORMITY WITH THE SAMPLE OF RICE SUBMITTED BY THE SELLER AT THE TENDE R. --------- ------------ 11. PAYMENT PAYMENT FOR THE NET QUANTITY OF RICE LESS 10% OF THE TOTAL FREIGHT COMPONENT SHALL BE MADE BY THE BUYER THROUGH AN IRREVOCABLE W ITHOUT RECOURSE LETTER OF CREDIT TO BE ESTABLISHED BY THE BUYER IN FAVOUR OF THE SELLER. THE LETTER OF CREDIT WILL BE OPENED AS PER RULES AND REGULATIONS OF THE LINE OF CREDIT GIVEN TO THE GOVERNMENT OF SRI LANKA BY THE GOVERNMENT OF INDIA. THE TEN PERCENT (10%) OF THE FREIGHT COMPONENT RETAINED WILL BE RELEASED ON FINALIZATION OF DISPATCH AT DISCHARGE PORT AND AFTE R MAKING RECOVERIES FOR CARGO CLAIMS, QUALITY DEFECTS, CARGO DAMAGES, SHORTAGES, ETC. IF ANY AT DISCHARGE AND THE EXTRA INSURANCE PREMIUM INVOLVED DUE TO THE OVERAGE OF THE CARRYING VESSEL. I.T.A. NO.71/MDS/2011 21 ALL BANK CHARGES OUTSIDE SRI LANKA INCLUDING CON FIRMATION CHARGES IF CONFIRMATION REQUIRED BY THE SELLER, SHALL BE TO SE LLERS ACCOUNT. TRANSFERABLE LETTERS OF CREDIT WILL NOT BE ESTABLISHED. DOCUMENTS REQUIRED : A) CLEAN FULL SET (3/3) SHIPPED ON BOARD, MARINE BILLS OF LADING IN TRIPLICATE SHOWING NUMBER OF BAGS, GROSS AND NETT WEIGHT OF CO NSIGNMENT SHIPPED IN M/TONS, BILL OF LADING BEARING ENDORSEMENT VESSEL NOT RESPONSIBLE FOR BAGS TORN AND MENDED ARE NOT ACCEPTABLE TO THE BUYER. B) INVOICE IN TRIPLICATE SHOWING THE NUMBER OF BAGS, G ROSS AND NETT WEIGHT OF CONSIGNMENT IN M/TONS, RATE INVOICE VALUE, MARKS AN D TARE WEIGHT OF A BAG IN KILOGRAMS INVOICE VALUE SHOULD BE FOR NETT QUANT IYY OF RICE LEE 10% OF TOTAL FREIGHT COMPONENT AND AGENCY COMMISSION PAYABLE TO BENEFICIARYS AGENT IN COLOMBO. C) A LOAD PORT SURVEY CERTIFICATE OF WEIGHT ISSUED SHO WING GROSS AND NETT WEIGHT OF CONSIGNMENT AND TARE WEIGHT OF EACH BAG F ROM AN INTERNATIONALLY RECOGNIZED INDEPENDENT SURVEYOR OR THEIR AUTHORIZED AGENTS APPOINTED BY THE BUYER AT BUYERS EXPENSE. D) THE LOAD PORT SURVEY CERTIFICATE OF QUALITY, SPECIF ICATION, FIT FOR HUMAN CONSUMPTION, PACKING WEIGHT , CORRECT STOWAGE ON BO ARD THE CARRYING VESSEL AND CONDITION AND ANALYSIS OF SHIPMENT SAMPLE BASED ON A MINIMUM OF 0.5% OF THE CARGO COMPRISING THE SHIPMENT FROM AN INTERN ATIONALLY RECOGNIZED INDEPENDENT SURVEYOR APPOINTED BY THE BUYER AT BUYE RS EXPENSE. THIS CERTIFICATE SHOULD INDICATE THAT INSPECTION HAD BEE N CARRIED OUT AT THE MILLS/STORES AND JUST BEFORE LOADING AND ON BOARD T HE CARRYING VESSEL. E) AN INSPECTION OF THE CARGO AT LOAD PORT WILL BE CAR RIED OUT BY THE CWE OFFICIALS AT THE LOAD PORT AND THE CERTIFICATE OF C ONFORMITY ISSUED BY THESE OFFICIALS AFTER THE INSPECTION WILL BE A DOCUMENT R EQUIRED FOR NEGOTIATION OF LETTER OF CREDIT. F) CERTIFICATE OF ORIGIN OF GOODS IN TRIPLICATE G) PHYTOSANITORY CERTIFICATE ISSUED BY CONCERNED GOVER NMENT DEPARTMENT/AUTHROITY. H) CERTIFICATE OF PACKING. I) HOLDS CLEANLINESS CERTIFICATE ISSUED BY AN INDEPEND ENT SURVEYOR CERTIFYING HOLDS OF CARRYING VESSEL FIT FOR CARRYING RICE IN B AGS. J) CERTIFICATE FROM THE BENEFICIARY THAT COPY DOCUMENT S INCLUDING BILL OF LADING AND CHARTER PARTY IF APPLICABLE HAVE BEEN COURIERED TO THE BUYER WITHIN TWO WORKING DAYS OF SHIPMENT. K) CERTIFICATE FROM THE BENEFICIARY THAT HE HAD FAXED CABLED OR TELEXED THE REQUIRED SHIPMENT DETAILS TO THE BUYER IMMEDIATELY AFTER THE SHIPMENT. ---------- ----------- I.T.A. NO.71/MDS/2011 22 13. PERFORMANCE BOND THE REQUIRED PERFORMANCE TO THE VALUE OF 10% OF THE TOTAL VALUE OF THE ORDER SHOULD BE FURNISHED WITHIN THE STIPULATED PERIOD AF TER INTIMATION OF ACCEPTANCE OF THE TOTAL ORDER AWARDED, STRICTLY ACC ORDING TO THE CWE DRAFT AND THIS SHOULD BE ENCASHABLE AT SIGHT AT THE COUNT ERS OF THE ADVISING BANK IN SRI LANKA ON OR BEFORE 23.11.2001. 14. RELEASE OF PERFORMANCE GUARNATEE: THE RELEASE OF THE ABOVE PERFORMANCE GUARANTEE WILL BE ON THE BASIS OF SELLERS PERFORMANCE STRICTLY AS PER THE SIGNED CON TRACT AND SELLERS ARE LIABLE TO COMPENSATE THE CWE FOR ANY QUALITY, PACKING AND WEIGHT DISCREPANCY FOUND AT THE PORT OF DISCHARGE SUBJECT TO A JOINT SURVEY ARRANGED BY THE BUYER AND SELLER. IF SELLER DOES NOT APPOINT A SURVEYOR O N THIS OWN ACCOUNT AT DISCHARGE PORT, THE BUYER WILL ARRANGE THE SURVEY O F HIS OWN. -------- -------- 15. ARBITRATION ANY DISPUTE ARISING BETWEEN THE BUYER AND SELL ER SHALL BE REFERRED TO ARBITRATION. IF THE BUYER AND THE SELLER FAIL TO AG REE UPON A SINGLE ARBITRATOR, EACH SHALL APPOINT ONE ARBITRATOR. IN THE EVENT OF DIFFERENCE OF OPINION BETWEEN THE ARBITRATORS, SUCH DIFFERENCE SHALL BE R EFERRED TO AN UMPIRE NOMINATED BY THE ARBITRATORS.--------- IF ONE OF T HE PARTIES FAIL TO APPOINT AN ARBITRATOR WITHIN THE SPACE OF 30 DAYS AFTER THE PA RTY HAS BEEN REQUESTED TO DO SO, THEN THE ARBITRATOR APPOINTED BY THE OTHER PART Y SHALL HAVE THE RIGHT TO MAKE FINAL DECISION ALONE. THE ARBITRATION SHALL BE HELD IN COLOMBO, SRI LANKA. ---------- ----------- ----------- ---------- SD/- SD/- SELLER BUYER NATIONAL AGRICULTURAL CO-OPERATIVE THE CO-OPERATIVE WHOLESALE MARKETING FEDERATION OF INDIA LTD. ESTABLISH MENT. LETTER OF CREDIT OBTAINED BY THE BUYER FROM M/S. BA NK OF CEYLON WAS ALSO IN THE NAME OF NAFED AND COPY OF SUCH LETTERS HAS BEEN FILE D BY THE LEARNED DR AT PAGES 62 TO 65 OF HIS PAPER BOOK. SHIPPING BILL FOR THE EXPORT WAS ALSO ISSUED BY NAFED AND COPIES OF SUCH SHIPPING BILLS HAVE ALSO BE EN FILED BY THE LEARNED DR I.T.A. NO.71/MDS/2011 23 AT PAGE 61. THUS WE FIND THE ASSERTION OF THE LEAR NED DR THAT ALL THE RELEVANT DOCUMENTS WERE EXECUTED IN THE NAME OF NAFED TO BE A BSOLUTELY CORRECT. ASSESSEE HIMSELF HAS IN HIS LETTER DATED 24.11.2007 ISSUED TO THE ASSESSING OFFICER PLACED AT PAGE 3 OF HIS PAPER BOOK ACCEPTED THAT THE DEPB BENEFITS WERE AVAILABLE TO NAFED, SHIPMENT WAS ACCOUNTED IN THE NA ME OF NAFED UNDER THEIR INVOICES, EXPORT APPLICATIONS WERE IN THE NAME OF N AFED AND LETTER OF CREDIT WAS OPENED IN THE NAME OF NAFED. ASSESSEE HAS ALSO AFFI RMED THAT NAFED WAS ELIGIBLE FOR DEPB BENEFITS. AS PER THE BRIEF NOTE O N EXPORT TO SRI LANKA GIVEN BY THE ASSESSEE APPEARING AT PAGES 6 & 7 OF HIS PAPER BOOK, ASSESSEE WAS TO MEET ALL EXPENSES SUCH AS CLEARING AND FORWARDING, TRANS PORT, RE-PROCESSING OF GOODS, TO MEET THE REQUIREMENT OF LETTER OF CREDIT TERMS, RE-PACKING AND FOR PLACING THE GOODS ON BOARD THE VESSEL FOR EXPORT. THUS, AFTER GETTING THE RICE RELEASED FROM THE GODOWNS OF FCI, ASSESSEE WAS DOING SOME RE-PACK ING AND SOME RE- PROCESSING TO MEET THE REQUIREMENTS OF THE BUYER. WITHOUT DOUBT NAFED WAS PAYING FOR THE RICE AND GETTING THE RICE RELEASED F ROM THE GOVERNMENT STOCK. HENCE THE PURCHASE OF THE RICE ALSO ACCOUNTED BY NA FED ONLY. IT IS FOR THIS REASON ASSESSEES P & L ACCOUNT DOES NOT SHOW ANY P URCHASE OR SALE IN RELATION TO THE EXPORTS TO SRI LANKA. EVEN IF WE CONSIDER T HE ASSESSEE TO BE A SUPPORTING MANUFACTURER, FOR A SUPPORTING MANUFACTURER TO CLAI M DEDUCTION U/S 80HHC ESSENTIAL CONDITIONS TO BE SATISFIED ARE SPECIFIED IN SUB-SECTION (1A) OF SECTION 80HHC AS REPRODUCED BELOW : I.T.A. NO.71/MDS/2011 24 (1A) WHERE THE ASSESSEE, BEING A SUPPORTING MANUFAC TURER, HAS DURING THE PREVIOUS YEAR, SOLD GOODS OR MERCHAN DISE TO ANY EXPORT HOUSE OR TRADING HOUSE IN RESPECT OF WHIC H THE EXPORT HOUSE OR TRADING HOUSE HAS ISSUED A CERTIFICA TE UNDER THE PROVISO TO SUB-SECTION (1), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASS ESSEE, A DEDUCTION TO THE EXTENT OF PROFITS, REFERRED TO IN SUB-SECTION (1B), DERIVED BY THE ASSESSEE FROM THE SALE OF GOOD S OR MERCHANDISE TO THE EXPORT HOUSE OR TRADING HOUSE IN RESPECT OF WHICH THE CERTIFICATE HAS BEEN ISSUED BY THE EXPORT HOUSE OR TRADING HOUSE. THUS IT IS AN ESSENTIAL CONDITION FOR AN ASSESSEE T O OBTAIN A CERTIFICATE FROM EXPORT HOUSE OR TRADING HOUSE. SUB-SECTION (4A) CLE ARLY STIPULATES THAT SUCH CERTIFICATE FROM EXPORT HOUSE OR TRADING HOUSE SHOUL D CLEARLY STATE THAT IT HAD NOT CLAIMED A DEDUCTION U/S. 80HHC IN RESPECT OF TH E EXPORT TURNOVER MENTIONED IN THAT CERTIFICATE. HERE, NAFED HAD CLEARLY SUBMIT TED BEFORE THE ASSESSING OFFICER ITS LETTER DATED 22-11-2006 THAT IT HAD NOT ONLY CLAIMED DEDUCTION U/S 80HHC ON EXPORTS DONE BY THEM THROUGH THE ASSESSEE, BUT HAD ALSO NOT ISSUED ANY DISCLAIMER CERTIFICATE AS SPECIFIED IN SUB-SECT ION (4A) TO SECTION 80HHC OF THE ACT. THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE AS REPRODUCED BY THE ASSESSING OFFICER AT PAGE 3 OF HIS ORDER RUNS AS UNDER: CAPRO CONNECTIONS TRADING AND PROFIT AND LOSS A/C FOR THE YEAR ENDED 31 ST MARCH 2002 TO OPENING STOCK XXXX BY EXPORT SALES ` 5,50,66,078 PURCHASES XXXX BY LOCAL SALES ` 9,37,770 I.T.A. NO.71/MDS/2011 25 ALL THE DIRECT EXP XXXX BY CLOSING STOCK XXXX TO GROSS PROFIT C/D ` 10,79,370 BY GROSS PROFIT B/D ` 10,79,370 TO ALL EXPENSES XXXX BY PROFIT ON EXPORTS A/C NAFED ` 1,65,85,463 TO NET PROFIT TRANSFERRED TO CAPIOTAL A/C BY OTHER INCOME ` 1,04,948 ` 1,36,42,436.00. THIS WOULD CLEARLY SHOW THAT THE ASSESSEE HAD NOT I NCLUDED HIS SALE PROCEEDS TO THE PARTY AT SRI LANKA WHICH CAME TO ` 31,87,47,324/-, BUT HAD ONLY SHOWN THE PROFIT ON EXPORTS. JUST BECAUSE ASSESSEE HAD CREDI TS OF FOREIGN EXCHANGE IN HIS BANK ACCOUNT, THAT TOO BASED ON AUTHORISATIONS GIVE N BY NAFED, WOULD NOT MEAN THAT ALL OTHER CONDITIONS FOR GETTING A DEDUCTION U NDER SECTION 80HHC ARE TO BE IGNORED. EVEN IF WE PRESUME THAT ASSESSEE HAD TAKEN CONSIDERABLE RISK BY GETTING HIMSELF INVOLVED IN AN EXPORT UNDERTAKEN BY NAFED, IT COULD NOT BE SAID THAT ALL RETURNS, INCLUDING BENEFITS AVAILABLE TO A N EXPORTER UNDER THE ACT, SHOULD BE GIVEN TO HIM, WITHOUT SATISFYING THE CONDITIONS SPECIFIED THEREIN. 12. IN THE CASE OF MINERAL & METAL TRADING CORPORAT ION V. R.C. MISHRA & OTHERS, SUPRA, IT WAS HELD BY THE HON'BLE APEX COUR T THAT MINERAL & METAL TRADING CORPORATION COULD BE CONSIDERED AN EXPORTER FOR THE REASON THAT IMPORT LICENCE WAS ISSUED IN THE NAME OF MINERAL & METAL T RADING CORPORATION AND GRI I.T.A. NO.71/MDS/2011 26 FORM CLEARLY SHOWED MMTC AS THE EXPORTER. AGAIN IN THE CASE OF SEA PEARL INDUSTRIES AND OTHER V. CIT RELIED ON BY THE ASSESS ING OFFICER, IT WAS CLEARLY HELD THAT BOTH EXPORT HOUSE AS WELL AS SUPPORTING MANUFA CTURER COULD NOT CLAIM DEDUCTION U/S. 80HHC IN RESPECT OF THE SAME AMOUNT. ASSESSEE, AS ALREADY MENTIONED BY US, WAS UNABLE TO PRODUCE ANY DISCLAIM ER CERTIFICATE FROM SUCH EXPORT HOUSE. IN OUR OPINION, ASSESSEE COULD NOT H AVE MADE A CLAIM OF DEDUCTION U/S. 80HHC IN RESPECT OF THE EXPORTS DONE BY NAFED UNDER AN AGREEMENT ENTERED INTO BY THEM WITH A FOREIGN BUYER WHEN ALL THE RELATED EXPORT DOCUMENTS WERE IN THE NAME OF NAFED. ASSESSEE COULD NOT BE CALLED A SUPPORTING MANUFACTURER WHEN NAFED ITSELF HAD CLAIME D DEDUCTION U/S 80HHC OF THE ACT ON THE SAME AMOUNT AND NEVER ISSUED ANY DIS CLAIMER CERTIFICATE AS PER SUB-SECTION (4A) OF THE ACT. WE THUS DO NOT FIND A NY MERITS IN THIS APPEAL OF THE ASSESSEE. IT IS THEREFORE DISMISSED. 13. THE ORDER WAS PRONOUNCED IN THE COURT ON 20-05- 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH MAY, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE